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Starbucks' credit outlook upped by S&P

NEW YORK Credit rating agency Standard & Poor’s revised upward its short-term look at Starbucks Corp.’s corporate credit rating, citing cost controls and the reduction of debt.

S&P said Friday the coffeehouse company’s rating, which is BBB, one that is just three notches below the highest rating of AAA, was affirmed and given a stable outlook, up from a negative one, because of improved credit metrics and stabilized performance.

“The ratings are based on Starbucks’ leading market position and excellent brand recognition in the specialty coffee market in the U.S., as well as a history of strong cash flow generation,” said Standard & Poor’s credit analyst Jackie E. Oberoi. “Weak top-line growth due to the U.S. recession tempers these strengths.”

In its latest quarter ended June 28, Starbucks swung to a profit of $151.5 million, or 20 cents per share, versus a net loss of $6.7 million, or 1 cent per share, in the same quarter a year ago. Latest-quarter total operating expenses fell about 15 percent, mainly from reduced restructuring charges that totaled $51.6 million, versus $167.7 million in the year-ago quarter. Those year-ago charges stemmed from the closures or planned closures of 800 corporate stores in the United States, the restructuring of the company’s business in Australia, and the closures of an additional 100 corporate locations in international markets.

The company cut $175 million in expenses during the latest quarter, and officials said they expect to see $550 million in savings by the end of the fiscal year. The company also reduced its total debt by nearly 57 percent, to $549.8 million.

Starbucks, based in Seattle, operates or licenses 16,729 locations worldwide.

Contact Sarah E. Lockyer at [email protected].

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